As you have read this week, national income accounting measures the overall performance of an economy and has many real-world applications for economists and policymakers, such as:
Assessing the economy’s health by monitoring production and employment levels.
Tracking the economy’s long-run growth trajectory.
Adjusting economic policies to safeguard and improve the economy’s health.
Arguably the most prolific key macroeconomic indicator, GDP is a reasonably accurate and highly useful measure of how well or how poorly the economy is performing. However, it has several shortcomings as a measure of both total output and well-being (utility).
Directions
Browse through the BEA’S Prototype Measures of Economic Well-Being and Growth
OPTION 1: Prototype Measures of Economic Well-Being and GrowthDownload Prototype Measures of Economic Well-Being and Growth
OPTION 2: Scroll through the slides at Prototype Measures of Economic Well-Being and GrowthLinks to an external site.
In your discussion response, reflect on the following prompt:
Part 1: How accurate is GDP as an indicator of a society’s well-being? Identify at least four shortcomings of using GDP as a measurement of well-being (e.g. what are some items that are omitted from GDP and why is that relevant?)
What is income inequality and how well does GDP capture income inequality within a society?
What is the relationship between income inequality and economic well-being of a society?
Part 2: Consider the following challenge: you are tasked with depicting the economic well-being of a country’s citizens, and you are only allowed to present data from three of the measures featured in the BEA’s Prototype Measures of Economic Well-Being and Growth slideshow.
Which three indicators would you choose, and why do you believe those would be the best combination of macroeconomic indicators to most accurately portray well-being?
Supplemental Resources
Gross Domestic ProductLinks to an external site.
SUGGESTION: Learn to use economic tools to understand our economy; do not fall
back on popular myths and misunderstandings. People who not understand economic
tools and analytical techniques often depend on conspiracy theories to explain things.
That is understandable since there are certainly some evil people and organizations in the
world but sometimes their power is overstated and events that you see are simply due to
certain realities. Another problem in understanding our economy is that people do not
distinguish between the world as it is and the world that people wish existed and thus
their minds tend to shut out explanations of how things actually work.
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